Against a bank-guarantee-backed investment commitment from the Elon Musk-owned company to invest $2b in India, the government may agree to offer a reduced import duty to Tesla for the first few years of its business here
The long wait for a Tesla EV may soon end for high-end car buyers in India. According to reports, the Indian government is giving the finishing touches to a policy that may accommodate Elon Musk's condition for driving his marquee car brand into the country: A concessional import duty on cars exceeding $40,000 (Rs 33 lakh) for the first 2-3 years of its business in India.
But the concession will be contingent upon a bank-guarantee-backed commitment from Tesla to invest $2 billion in constructing an EV manufacturing plant in India.
Contrary to speculations, the US electric carmaker did not announce its entry into the Indian EV market during the Vibrant Gujarat 2024 summit, as the final call had yet to be taken, pending the government's decision on the tax break.
According to the existing policy, India imposes a 100 percent import duty on cars valued at over $40,000 (Rs 33 lakh) and a 60 percent import duty on vehicles valued under this amount. However, Elon Musk's electric carmaker, Tesla, said it would enter the Indian EV market and invest up to $2 billion in the country if the Centre cuts down the import duty to 15 percent for vehicles for the first two years of operations.
The government is reportedly favourably considering this request for limited-period concessional import duties on imported cars against bank guarantees. These bank guarantees can be encashed if the company fails to comply with the fixed timeline for making the promised investments.
Companies like Mahindra, Tata, and Ola Electric lead the space in electric vehicle manufacturing in India. These companies have often urged a level playing field, and concerns have been raised regarding an unfair advantage for Tesla.
Mahindra & Mahindra reached out to government officials to assert the need for a level playing field, urging a boost in manufacturing inside India. Ola CEO Bhavish Aggarwal has also been against importing electric cars from foreign players, saying that offering incentives to Tesla and other international firms can lead to a significant hit in sales for domestic players.